Has the Nation's Highest Minimum Wage Reduced Poverty?

October 1, 2013

The state Department of Labor & Industries (L&I) has announced the state’s minimum wage, already the highest in the nation, will increase in 2014 from the current $9.19 to $9.32 per hour. 

As debate swirls around whether workers should earn a minimum wage of up to $15 per hour to stave off poverty, it begs the question of just how effective has the nation’s highest minimum wage been at alleviating poverty?

Since the Great Recession began in 2007, Washington State’s minimum wage has increased 15.9%, from $7.93 per hour to today’s minimum of $9.19.  The new wage for 2014 will bump that increase up to 17.5%.  At the same time, our state’s unemployment rate also increased, from 4.6% in August 2007 to 7% in August 2013.

As Joseph Phillips, Dean of Seattle University’s Albers School of Business and Economics explains, when costs become too high for employers, they quit hiring or let people go.  As Phillips succinctly puts it, “At some point, it adds up and discourages employment.  We need a minimum wage law, but set it to high and it stops helping those it is designed to help.”

Study after study show increases in the minimum wage reduce the employment of low-skilled workers.  An increase in the minimum wage will help lift out of poverty the families of those low-skilled workers who remain employed, but other low-skilled workers will lose their jobs, have their hours significantly cut, or find it difficult to find a job, reducing their income and pushing their families into poverty.

The overall result is fewer people without a job and higher poverty rates.

In a wage survey of 336 labor economists, the University of New Hampshire Survey Center found that 93% believe a very high minimum wage law is not an efficient way to address the income needs of poor families.

Indeed, an ever-increasing minimum wage has not helped reduce poverty in Washington State.  In fact, our state’s poverty rate has increased over the years, even in the years before the Great Recession, despite the state’s minimum wage increase every year.  Today 14% of Washingtonians live in poverty.

“Since it usually reflects unemployment, the poverty rate won’t decrease until after unemployment drops significantly,” says Marieka Klawitter, an associate professor at the UW Evans School of Public Affairs and an affiliate of the West Coast Poverty Center.

And while proponents of a very high minimum wage theorize an increase in the minimum wage will boost job creation, the reality has proven otherwise.  Our state’s unemployment rate has increased since implementation in 1999 of the law that made Washington's minimum wage the highest in the nation.  Given that trend, it isn’t likely our state’s poverty rate will decrease soon. 

What will reduce poverty is the creation of more jobs; but for that to happen Washington needs policies that support job creation, not stymie it.  Our state's automatically increasing, high minimum wage makes reaching this goal nearly impossible.